Jeff Price of Audiam on YouTube Music Key

Initially by accident, and perhaps later by design, YouTube became the number one destination site on the planet for music listening, discovery and sharing. It now has more music listeners than every other streaming music service combined.

With this accomplishment under its belt, it is now making a concerted effort to become an even bigger deal in digital music with the launch of its new YouTube Music Key service.

With this launch come several notable changes to YouTube:

1) The demographic of people using YouTube to listen to music is most likely about to change

Until now, YouTube has been a young person’s music service. Case in point: my dad does not use YouTube to listen to music, but over sixty percent of 13 to 25-year-olds do.

With the launch of the new YouTube music service, there is the potential to change the demographics of the music user base to bring in the over 25 crowd. For example, my dad doesn’t go to YouTube and search for any random video with Frankie Valli and The Four Seasons in the background in order to listen to the song “Sherry Baby.” However, he may do so when YouTube streams songs in a way that’s more similar to Spotify.

2) For the first time, YouTube will be uploading its own videos and obtaining licenses BEFORE the videos go live

From its inception, YouTube has been the destination site for the people of the world to upload their own videos. These videos have contained everything from cat videos to parts of the actual movie Star Wars to videos with “unlicensed” music in them.

However, due to the laws in the U.S., as long as YouTube does not know specifically what is being uploaded, it is not liable for copyright infringement committed by its users. In addition, the videos could only be taken down from YouTube if the copyright owner found the infringing use and then notified YouTube with a specific link to the video. This created a situation where videos using other people’s copyrights got millions of views but no ad money (YouTube could not place an ad on the video unless the copyright holder said it was OK).

These quirks in the law allowed YouTube to create a huge user base of hundreds of millions of viewers and billions of videos. With this in place, it then launched a system that allowed it to get the required licenses to place ads and make money on user-uploaded videos AFTER they were uploaded to their service. With the launch of its new music service, YouTube will be, for the first time, creating its own videos. These videos will be “art tracks”—that is, a video that shows a static image of an album cover while music from that album plays.

Because YouTube, and not the “user,” is creating these videos, it means that YouTube must secure the licenses to the music in the videos BEFORE the videos go up on YouTube, not after. If they don’t, they are liable for copyright infringement. It also means that from inception the copyright holders should be paid for each view, unlike the way it works for the user-uploaded videos. Finally, as a consumer, it means you will find high-quality authorized streams of the songs you want with the assurance that the copyright holders and artists are getting paid.

3) You can “watch” videos on your phone with the videos in the background

Right now, when you watch a video with the YouTube app on your mobile phone, you cannot play the video and then go to another app or the “home page” of your phone without video play stopping. This is about to change.

With the launch of the new service, the new mobile app version of YouTube will allow you to play a video and continue playing it even if you move to another app or your phone “home page.” In other words, you can continue to hear the video without having to see it. Essentially, YouTube + your eyes closed = Spotify.

4) A first of its kind music subscription offering with videos AND music

Up to this point in time, we have only had subscription on-demand music services like Spotify, Rhapsody and Beats. These services allow consumers to pay a flat monthly fee (usually around $10 a month) to listen to whatever music they want, however they want, with no ads. Spotify, the biggest in the space, claims to have more than 12 million paid subscribers paying $10 a month.

With the launch of YouTube Music Key, there is a new twist: consumers can now pay the same amount they pay for Spotify, have unlimited ad-free access to as much (if not more) music, but ALSO have unlimited ad-free access to watch music videos and other video music content. In other words (for us old people), imagine if you could pay $10 a month for ad-free, interactive, on-demand MTV (back when it showed videos), AND listen to whatever music you want, however you want (like Spotify).

Or thought of another way, imagine if for the same $10 a month, Spotify offered unlimited music videos and other music video content on top of its existing streaming music service. This mixture of video and audio has never been offered before. It will be extremely interesting to see if this new offering is something consumers want.

5) YouTube follows you offline

For the first time, you can watch (and listen) to YouTube without being connected to the ’Net. The new YouTube service will allow a subscriber to store the videos in cache and play them even when they’re not connected to YouTube (just like Spotify). Your music and videos not only follow you everywhere, but you also can continue to watch them even if you lose your WiFi, 4G, 3G, LTE and/or any other digital connection.

6) Artists, publishers and songwriters know who is using their music on YouTube, and they get paid for it.

Until now, artists, publishers and songwriters usually had no idea who was using their music in videos on YouTube. With the launch of the YouTube Music Key service, the answer is simple: YouTube is. In order for YouTube to use the music, it must get two licenses: one for the recording of the song (called a “master”) and one for the lyrics and melody of the song (called a “composition”). It is required to get both licenses directly from the rightsholders and also pay them both directly.

7) To get licenses, videos on YouTube can legally be two things at once

Up to this point in time, YouTube has paid out “synchronization” royalties to songwriters/publishers, not “mechanical” royalties.

A “synchronization” license is the type of license needed to include music in a TV, show, film and/or commercial. The music is “synchronized” with the moving image. In order to get this license, the rights holder must agree to give it. In addition, the amount paid is open to whatever rate is negotiated between the user and the composition rights holder.

A mechanical license is the type of license needed to “reproduce” a composition. Examples of a “reproduction” are a download, making something physical with a recording of your song on it (like a CD or vinyl), or an interactive stream (like Spotify). In the case of mechanical licenses, the user is automatically granted permission by complying with government-mandated rules and paying a set rate. In other words, the composition rightsholder cannot say “no.”

To this point in time, YouTube has been a service that shows videos (think of each video uploaded to YouTube as a TV show). This means that, in order to monetize the video, YouTube needed to negotiate and license the rights to the composition in the video directly with the rightsholder and then pay a negotiated royalty rate.

With the launch of the YouTube Music Key service, YouTube is relying on the novel concept that a video can be two things at once: either a video requiring a “synchronization” license or an interactive stream needing a “mechanical license.” By taking this position, YouTube gets the needed license either via a direct “synch” license OR, if they don’t have (or can’t get) a direct synch license, via the compulsory (government set) license.

With these notable changes come yet another evolution (revolution?) to the music industry; once again we have the square pegs of technology not fitting into the round holes of copyright law. This time it is YouTube taking the next step; the question is will it be a step in the right direction? The end goal is to assure songwriters, publishers, labels and artists are paid accurately, fairly and on time for the use of their music. It’s truly not a lot to ask; it just hasn’t happened yet.

Jeff Price is the founder of Tunecore and the founding CEO of Audiam, a service that gets music copyright holders paid for the digital use of their music.